The Contract Clause: A Constitutional History by James W. Ely Jr. (review)

"Constitutional Questions are not decided in a vacuum" (p. 2). Perhaps no provision more clearly illustrates this point than does the contract clause of the U.S. Constitution (art. 1, §10). This oft-overlooked clause is rarely litigated today, but it was once regarded as one of the most important provisions in the Constitution. In his newest book, The Contract Clause: A Constitutional History, James W. Ely Jr. explores how this clause ebbed and flowed with the times, falling in and out of fashion at various points in United States history. While Ely spends a considerable amount of time discussing the legal reasoning jurists used to interpret the contract clause, he is also careful to document how larger social and economic forces shaped the way it was interpreted, ultimately leading to its downfall.

The book is organized chronologically. Ely begins by discussing how the contract clause was included in the Constitution largely in response to debt-relief measures taken by states in the wake of the Revolutionary War. Some feared that such measures would inject uncertainty into the economy and discourage future investments. Ely points out that many of the U.S. Supreme Court's earliest cases pertained to the contract clause, a testament to its importance at the time. Perhaps the most famous of these cases was Trustees of Dartmouth College v. Woodward (1819), in which the Court ruled that a "corporate charter was a constitutionally protected contract" that the state could not alter ex post facto (p. 36). While many have seen the Dartmouth College decision as a barrier to government regulation of business, Ely argues convincingly that states could and often did easily circumvent the decision by including clauses in their corporate charters that preserved their right to alter these agreements in the future.

Ironically, the contract clause began its decline in importance during the Gilded Age, an era most noted for its celebration of liberal economic principles. At the time, many Progressive reformers began to argue that the contract clause prevented states from breaking up monopolies and placing much-needed regulations on businesses. They successfully used the police powers doctrine to further limit the scope of Dartmouth College, arguing that states could not barter away their ability to protect the health and welfare of their citizens in perpetuity. Ultimately, corporations responded by moving away from making contract clause arguments, instead reaching for the Fourteenth Amendment's due process clause to protect their economic rights. The contract clause was undermined further during the New Deal era. With its decision in Home Building and Loan Association v. Blaisdell (1934), the Supreme Court eviscerated the contract clause, arguing that it should not be read literally and that states could violate the right of contract if it was in their economic interest to do so. Many have argued that this case effectively wrote the contract clause out of the Constitution, but Ely argues otherwise. He finds that many state courts have chosen to view their own state constitutions as more protective of contract rights than the U.S. Constitution and sees continuing contract clause debates in current budgetary disputes between cash-strapped state governments and public-sector employee pension holders.

There is much to like about this book. Ely offers a necessary update to the existing literature on the contract clause, which has not received significant scholarly attention since Benjamin Fletcher Wright's The Contract Clause of the Constitution (Cambridge, Mass., 1938). The big question hanging over this book, however, is why write about a clause that has such limited significance to Supreme Court jurisprudence today? To his credit, Ely takes on this question directly, arguing that the story of the contract clause provides a window into Americans' shifting concerns and assumptions and that its demise has been exaggerated. Ultimately, I was intrigued by his argument but only partially convinced of the contract clause's significance. Ely avoids taking a normative stance on the...